Sixth Circuit Finds 'Actual Charges' Term Ambiguous; Holds Insurer Liable For Fees Billed Rather Than Accepted As Payment

On June 21, 2012, in Pedicini v Life Ins Co, 682 F3d 522 (6th Cir 2012), the United States Court of Appeals for the Sixth Circuit affirmed the lower court's grant of summary judgment to the plaintiff insured on the basis that the term "actual charges" as it appeared in the plaintiff's insurance policy was sufficiently ambiguous to encompass the fees billed by the medical provider rather than the amount ultimately accepted as payment.

In Pedicini, the plaintiff held a supplemental cancer-insurance policy under which the cash benefits were to be paid directly to the plaintiff. The benefits conferred under the policy were based on "actual charges" "made by a person or entity furnishing the services, treatment or material." Id. at 724. The plaintiff was subsequently diagnosed with cancer and received treatment. The defendant insurer released benefits equal to the discounted amount accepted by the plaintiff's medical provider in light of the plaintiff's status as a Medicare recipient.

The plaintiff filed suit in Kentucky state court alleging breach of the insurance contract, and the action was removed on the motion of the insurer. The United States District Court for the Western District of Kentucky granted the plaintiff's motion for summary disposition, and the Sixth Circuit affirmed on appeal.

In affirming, the court noted that Kentucky law required that "an ambiguous term in an insurance policy be liberally construed so as to resolve all doubts in favor of the insured." Id. at 526 (citation omitted). Because a reasonable person could find the term...